Facing COVID-19 resurgence: new temporary redundancy plan or old temporary redundancy plan?

Business recovery after the state of emergency is still uncertain, particularly in sectors heavily dependent on the physical presence of customers and their rotation (hospitality and catering, retail, culture, and leisure) and indirectly for their suppliers, as the current COVID-19 health crisis remains in full swing.

The surge of new contagion hotspots and the fear of a second wave of the pandemic are forcing many autonomous regions to take preventive measures, through recommendations and new temporary restrictions, and leading many States to impose quarantines on people traveling from Spain. All of this is having a  negative impact on people’s movement and on the possibility that some businesses may open and that some activities may be carried out.

Many companies are facing new setbacks in sales, allowed capacity and opening hours, among others. For example, some parts of Catalonia, Aragón, Navarre, Murcia, and the Basque Country are recommending that people do not leave their homes except for work (when remote working is not possible) and to fulfill basic needs, and that retail businesses sale by telephone or online for in-store collection to avoid crowds. Seating is being limited to 50% or 60% and hours shortened. Also, cultural, recreational, and sporting activities, shows and nightlife are being suspended or restricted.

In many cases, these containment measures are going to prevent companies from totally or partially performing their activity. What can a company do in view of this new adverse scenario?

Perhaps the company is still applying a temporary redundancy plan on the grounds of force majeure with employees now back at work, which it has not yet canceled, and is benefiting from contribution exemptions, which can be extended until September 30, 2020. In that case, the new activity restrictions may mean that the measure most readily available to the company is to reapply that temporary redundancy plan to workers who were previously taken off it to temporarily adjust its labor force.

At the same time, however, companies affected by the latest autonomous region measures can request a new temporary redundancy plan on the grounds of force majeure “due to resurgence” provided in Additional Provision One, section 2, of Royal Decree Law 24/2020.

Many companies, therefore, have two alternatives: applying the previous temporary redundancy plan on the grounds of force majeure or requesting a new one due to resurgence. But what implications does this choice have for the company? To answer this question, we need to go over some key aspects of the business measure.

• How does it affect justifying the temporary redundancy plan?

If the company opts to put workers back on the previous temporary redundancy plan, it cannot be ruled out that the measure might be questioned further down the line by the Labor Inspectorate, the workers representatives or the workers themselves if any of them considers that the obstacle to the activity leading to workers being put back on the temporary redundancy plan does not arise from  the same force majeure as before, meaning the company should have applied a new temporary redundancy plan on the grounds of force majeure due to resurgence. This issue must be debated in each specific case.

If, on the contrary, the company decides to apply for a new temporary redundancy plan on the grounds of force majeuredue to resurgence, although it does not have to negotiate it with the workers’ representatives, the measure will require that the new force majeure claimed be accepted by the labor authorities through the appropriate administrative procedure initiated at the company’s request. The request must contain the necessary evidence and be duly communicated to the workers or their legal representatives.

This new force majeure will require two elements to be accepted: (i) the order imposing the new restrictions or containment measures in view of resurgence and (ii) that the government l decision prevent or restrict the  company’s activity in the affected work centers.

• What workers can a company include in the temporary redundancy plan?

If it applies the previous temporary redundancy plan on the grounds of force majeure,  workers not previously included cannot be added, as the scope of the initial request cannot be extended ex post.

If the company appllies for new temporary redundancy plan due to resurgence, this restriction will not apply, but it will be necessary to specify the scope of the measure, i.e., whether it entails total suspension of work contracts or reduction of working hours, and whether more or fewer workers are affected, particularly when the restrictions could increase subsequently and the company may have underestimated their effects.

• What procedure must the company follow?

If the company uses the previous temporary redundancy plan on the grounds of force majeure, it must communicate the new inclusion of workers to the General Treasury of Social Security (TGSS) via the RED System, which may not be without complication if the inactivity keys were deleted for the workers taken off. It must also submit to the State Public Employment Service the collective unemployment benefits request for the workers it had taken off and is now putting back on the temporary redundancy plan.

If, on the contrary, the company applies a new temporary redundancy plan on the grounds of force majeure due to resurgence, it must process before the labor authorities the ordinary temporary redundancy plan on the grounds of force majeure proceedings, regulated in section 47.3 of the Spanish Workers Statute (Estatuto de los Trabajadores) and sections 31 to 33 of Royal Decree 1483/2020.

The period for the Administration to decide will be the ordinary period of 5 business days and 10 business days to notify. Silence will be considered tacit approval. The labor authorities must obtain a mandatory report from the Labor Inspectorate and any other actions or reports it considers necessary, which will not delay the procedure (10 days deadline). It may even request a one-day hearing with the company and the workers legal representation if different facts, allegations or evidence from those submitted in the request are provided.

If the labor authorities do not find force majeure, the company may challenge the resolution before the labor courts and, alternatively, initiate a temporary redundancy plan based on economic, technical, organizational or production grounds.

If the force majeure is accepted, the company will communicate the final decision on temporary suspension or reduction of working hours to the labor authorities and the workers’ representatives. The affected workers must be individually nofified of the measure, indicating the specific days of suspension or reduction, the reduction percentage, if applicable, and the effective date, which will apply retroactively to the date of the event causing the force majeure or the subsequent date on which the activity has ceased without receiving a salary, and the collective request for unemployment benefits must also be processed.

• What contribution exemptions can a company opt for?

Whether the company reapplies a previous temporary redundancy plan on the grounds of force majeure still in force or it initiates a new one due to resurgence, it may apply the company Social Security contribution exemptions until September 30, 2020, although the amounts will not be exactly the same, as the exemptions envisaged for inactive workers in the temporary redundancy plan due to resurgence are more favorable:

• Will the commitment to maintain employment be extended?

If the company has taken advantage of a previous temporary redundancy plan on the grounds of force majeure with contribution exemptions, it will be subject to the commitment to maintain employment for six months after it resumes its activity.

If it opts to apply a new temporary redundancy plan on the grounds of force majeure due to resurgence, will the term of the commitment be extended? In view of the silence of the law on this point, it is arguable that, in this type of temporary redundancy plan, the commitment to keep the workers affected by the temporary redundancy plan employed for six months does not apply.

Therefore, if the company was already subject to the commitment to maintain employment due to a previous temporary redundancy plan, the 6-month period will continue to run without being extended.

• Will the company be subject to a new prohibition on distributing dividends?

Again, if the company (with over 50 workers on Feb. 29, 2020) requests a new temporary redundancy plan due to resurgence, the prohibition on distributing dividends will not apply for the year of the temporary redundancy plan on the grounds of force majeure, given the regulation’s silence on the matter. It will apply, however, if the company has executed a previous temporary redundancy plan on the grounds of force majeure or based on economic, technical, organizational or production grounds with contributions exemption.

• Will the term of the affected fixed-term contracts be suspended?

Since section 5 of Royal Decree Law 9/2020 contains no reference to temporary redundancy plans on the grounds of force majeure due to resurgence, it can also be concluded that, in these cases, the agreed or maximum term of the affected workers’ fixed-term contracts is not suspended, and they will continue to run throughout the temporary redundancy plan.

Ultimately, both the old temporary redundancy plan and a new temporary redundancy plan due to resurgence offer advantages and disadvantages that must be assessed in each case, although the best news would undoubtedly be that the company did not need to resort to either of these measures, which would signal that the health and economic crisis is starti

Autor: Francisco Ramón Lacomba